00:06right welcome back it's time for our weekly segments on ETF IQ Asia I mean certainly
00:10events that are taking place in the real world in real time are affecting everything else that's
00:14been going on as well so just to mention the breaking news in the last few minutes or so
00:19of course the scoop coming out of Axios here talking about how President Trump is expected
00:24to receive this briefing on new options military options and as far as what the military has
00:31proposed could be possible in terms of striking Iran so what we're seeing as far as markets go
00:37is we are at session lows on the Asia-Pacific we've completely erased any semblance of the gains we are
00:43just down of course eight tenths of one percent it's worth pointing out in terms of magnitude
00:46and of course in Brent prices yeah if you're just joining us for about a week or so and taking
00:51a
00:51break yes we are back above 120 and the front end contract is now at 121.50 it doesn't help
01:00it doesn't help that most of Asia will be shut from tomorrow for a long weekend so the the bar
01:07to take on more risk is perhaps on the higher side of things particularly in the last few
01:13minutes or so notwithstanding of course the boom we're continuing to see across the
01:17the AI space and Samsung were really as a good reminder of of that boom still taking place on
01:23the micro and macro front when you look at macro numbers in in Korea right let's talk about all this
01:28and more and let's bring in money manager who's actually selecting and speaking of ETFs and using
01:33ETFs in his portfolio where they now actually make up 60 percent to focus on what investors should be
01:38thinking about joining us here on set is Alexei Mironenko global head of investment solutions at
01:44Leo wealth very nice to see you yeah thank you for having me could you tell us a little bit
01:47about
01:47what you guys do so we manage money for individuals fiduciary discretionary investment portfolios with
01:53the goal of doing well in terms of relative markets hitting their financial life-saving objectives
01:59okay and making sure that we manage costs as much as we can because of course that's one of the
02:03biggest determinants yeah of a good result in investing over the long term okay so these are
02:08long-term investors in terms of the time horizon or do you do tactical as well we do both depends
02:12on
02:12what the clients ask us to do but it's about you know about 1500 individuals around the world we
02:17only manage money for people and we use ETFs we use stocks we use alternatives really whatever is
02:24right for their financial plan okay so I mean 1500 people might be generalizing in the next question
02:29but what's been popular recently you know to be honest our clients self-select us because they think
02:35about not what's happened over the last two three months but what do they need to do over the next
02:3910 20 years okay so global asset allocation long-term capital market performance certainly
02:46in a desire to hedge the oil risks to think about diversifying from the U.S. because U.S. markets
02:53are
02:53expensive and of course the U.S. is almost starting to be unique in the world of having a very
03:00tech
03:01focused market and not as much energy market yeah I'm looking at what you bring here so I'm just
03:08reading my notes here outcome oriented design over product novelty that sounds like something I would
03:14read on LinkedIn what does it mean in the in real terms it means we don't buy the hot new
03:19thing for
03:19our clients okay if a client is interested in Asian equity exposure we're going to look at what has
03:26worked in Asian equities over the last 10 20 years what's the best way to get that exposure not what
03:30the shiniest new thing that's being marketed by investment banks or private banks to clients do people still
03:36look at Asia as one they do you know we have a global business we have a we have people
03:41in the
03:41U.S. and with people in Asia our U.S. clients look at not only Asia as one but rest
03:46of world as one
03:47ex-US it's a U.S. portfolio and a tiny little ex-US portfolio right within Asia of course people
03:52get a lot
03:53more granular tends to be a Japan China and everything else question now just in terms of ETFs and you're
04:00based in Hong Kong yes with the arrival of more and more of these products has liquidity become an
04:06issue in as far as the individual offerings are concerned you know I think there's a massive
04:11misconception about liquidity in ETFs people think that just because an ETF is small or because it
04:16doesn't have a lot of trading means you can't put a large trade through that's that's simply not
04:20not true there's plenty of market makers if you know how to trade ETFs you can trade any ETF
04:26in size the proliferation of so many more products actually is a good thing it gives you a lot more
04:32choice and the market makers really are able to generate enough liquidity so you know we've done
04:40200 million dollar trades in ETFs that were 100 million dollars the day before that's in Hong Kong
04:46correct okay elsewhere in the region I mean is it unique to Hong Kong because I mean Hong Kong's been
04:51around no I mean Japan China Korea and Hong Kong are the four places where really liquidity is not
04:57a problem anymore when you get to Southeast Asia and to a lesser extent Taiwan yes you have that
05:02problem because every market is unique in the US you have one gigantic market in Europe increasingly
05:07more and more similar but in Asia we still have different regulatory regime different exchange rules
05:12for every single ETF so you've got to know how to trade that local market if you're going to
05:18active ETFs have been it's a hot topic recently we've seen a lot of global issuers come to this
05:24part of the world and looking at being able to do that is the market ready for that I mean
05:29we
05:29certainly are we we've we were among the first people to start using them because active ETFs are
05:33pretty phenomenal thing they take all the good things about active yeah which is you know insight
05:38professional management and remove all the bad things which is concentration and high fees so you can
05:44get similar strategies for much much lower ongoing holding costs and therefore they actually have
05:49a chance of outperforming right if you if you take enough risk to outperform by one or two percent but
05:54you charge one or two percent why bother right if you take enough risk to perform by one or two
05:59percent but
06:00then in ETF active ETF form you're charging 30 basis points there's a very likely scenario that you
06:05consistently outperform so it does make a lot more sense is the market ready I think long-term investors
06:14because active ETFs do not make sense for short term if you want to bet on Korea's you know memory
06:19chip ramp you shouldn't use an active Korea ETF you should just buy a Korea ETF straight up beta or
06:25buy
06:26a memory chip ETF right but if you are thinking of a five seven year allocation to Asian equities
06:33then an active ETF may well make sense I know you're big on making sure that cost is coming down
06:39as well
06:39in terms of designing them and everything else and it does make sense right why would you go with
06:43an active manager if they're charging you an arm and a leg but so my question is it sounds easier
06:48said than done the have you seen a trade-off between lower cost and ETFs and the tracking errors that
06:56some of these ETFs then are then able to to be able to say that they're actually being able to
07:02to track
07:02what they want to track yeah for for sure with active ETFs the moment you go active your tracking
07:07error starts starts to rise and then you need to think through as the selector as the asset allocator
07:12it's almost a similar selection process to active do I like the way they take their tracking error
07:17does this approach long-term make sense with beta was pretty straightforward it's an SMP 500 ETF right
07:25which one is the cheapest which one is the most liquid what does it track within a basis point or
07:30within two basis points with active not only are they all tracking by you know half a percent one percent
07:36three percent but the way they're doing it is each one is different so you've got to sit down and
07:41understand what is the investment strategy how do they get to the three percent tracking error because
07:47it may well you know one approach will work well in one type of market another will not work well
07:52for
07:52example a value focus manager will have done horribly during the last three weeks because they're massive
07:58you know because tech stocks outperform right right very quickly I know you guys have secured some
08:02funding for growth what we did what are your plans very quickly yeah um well in short to expand
08:08everything we do for clients so we um we've been um over the last five six years growing at about
08:1420
08:14a year acquiring new clients but of course the more clients you have the more services you need to
08:18provide so we plan to grow in Japan where we have an office we plan to grow in Singapore both
08:23on the
08:23client side but also investment capabilities so I have a new person starting next week on my team
08:27we're probably going to add a few more um do more in public markets but also um start to develop
08:34some
08:35uh private market capability to be able to help our clients allocate to that but again in a low-cost
08:41efficient way looks like we have a lot to talk about in the next time next time Alexei thank you
08:46so
08:46much yeah thanks for having me for taking the time here Alexei uh the global head of investment
08:50solutions at wealth management firm Leo well yeah you can tune into if you think the set is cool and
08:56the music
08:56is also such ETF IQ Asia every Friday it's Thursday because we're on holiday tomorrow on the China
09:01show we'll be bringing you more analysis conversations lots more ahead this is Bloomberg
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